Massachusetts divorce lawyer Jason V. Owens reacts to a recent case awarding
a former husband a share of future royalties in divorce from author wife.

AUGUST 6, 2015 – In a slip opinion for
Canisius v. Morgenstern,
14-P-0341, announced today, the Massachusetts Supreme Judicial Court (SJC)
held that an author’s right to receive future royalties constitutes a
marital asset that can be assigned to the author’s former spouse in a
divorce. The case focused on the royalties received by author
Erin Morgenstern for her best-selling 2012 novel,
the Night Circus. The SJC held that Morgenstern’s future royalties for Night Circus were a
marital asset that were subject to division in Morgenstern’s 2013
divorce from her former husband, Peter Canisius.

The case features a clear, well-written opinion that articulates the dividing
line between interests that are so uncertain that they are deemed mere
“expectancy” interests – and thereby excluded from marital
division – and the vast majority of assets that are subject to division
in Massachusetts
divorce cases. The opinion provides several examples of non-divisible “expectancy”
interests, including a spouse’s potential employment earnings in
the future, the uncertain value of an untested scientific patent, and
a spouse’s unvested interest in a will or trust that “may
never be achieved due to death, illness or simply market factors”.

Most divorce books don’t involve royalties.

In contrast to these examples, the SJC found that Morgenstern’s right
to receive future royalties for Night Circus constituted a
marital asset that should have been divided in the
divorce. The opinion notes that Morgenstern’s contractual right to receive
future royalties is “analogous to a party’s interest in the
payment of pension rights which has been recognized as
marital property subject to division.” Accordingly, the SJC found that the probate
and family court judge could (and should) have awarded Canisius a percentage
of the future royalties “on an if and when received basis”
as part of the divorce.

In 2006, Morgenstern married Canisius, a chemical engineer who earned $90,000
per year. Between 2006 and 2010, Canisius provided reliable financial
support to Morgenstern while she wrote Night Circus, helping the author
avoid “starving artist” status. By 2010, Morgenstern had largely
finished writing Night Circus. In 2011, Morgenstern and Canisius separated
permanently. Although Night Circus was written before the separation,
Morgenstern engaged in a busy book tour after the separation, including
more than 70 promotional appearances that contributed to the book’s
success. Night Circus was ultimately published in July 2012, grossing
more than $3 million in royalties in the following 16 months. The couple,
who lived in Boston, were divorced following a multi-day trial before
Hon. Brian J. Dunn of the Suffolk Probate & Family Court in late-2013.

Following trial, Judge Dunn awarded Canisius a lump sum payment of $570,000
as “his share of the royalty and book-related earnings [that Mogenstern]
has received to datefrom the publication of [her] novel”. However,
Dunn’s decision specifically excluded Morgenstern’s
future royalties from the division of assets, where Dunn found future royalties
were a mere “expectancy interest” due to their uncertain value.
Canisius appealed Dunn’s decision, arguing to the SJC that he should
have been entitled to a percentage of Mogenstern’s future (i.e. post-divorce) royalties for Night Circus.

SJC: Trial Court Had it Wrong

The
SJC reversed Dunn’s decision and remanded the case for additional trial to determine
Canisius’s share of the future royalties. The Court found that Mogenstern’s
future royalties arose out of vested contractual rights that were subject to
marital division under Massachusetts law. The Court noted, for example, that even if Morgenstern
died, her estate would be entitled to continue receiving royalties after
her death. Such an inheritable asset, the Court observed, was more substantial
than a mere “expectancy interest”.

[W]e are unwilling to deny one spouse, who contributed to the acquisition
or appreciation of property during the marital enterprise, “the
right to share in what may be the most valuable asset between the spouses”
on the basis of the uncertainty or future contingencies bound up in that asset.

For his appeal, Canisius argued that “one spouse’s direct contribution
of skills or talent to a
marital asset should [not] outweigh the different but equivalent marital contributions
of the other spouse” when it is clear that the spouses “made
distinct but equal contributions to their marital partnership.”
The SJC appeared to accept Canisius’s general point, but found the
facts did not fully support Canisius’s claim. The Court noted, for
example, that Morgenstern performed substantial promotional work for Night
Circus – including more than 70 personal appearances – after
she separated from Canisius in 2011. As such, the Court found that at least
some of Morgenstern’s work on Night Circus occurred outside of the “marital
partnership”. (The Court’s rejection of Canisius’s argument
regarding his “equal” contribution to Night Circus will reduce
his share of future royalties when the issue is addressed by Judge Dunn
on remand.)

Indeed, it should be noted that the remand to Judge Dunn does not
guarantee Canisius a major share of the future royalties for Night Circus at all.
Had Judge Dunn’s original findings stated that Dunn considered future
royalties when calculating the lump sum figure of $570,000, the appeal
may have never happened, given the trial judge’s discretion when
making factual findings. Instead, Dunn excluded future royalties from
the division of assets as a
matter of law, creating an appealable issue for Canisius. On remand, Dunn could still
limit Canisius’s interest in future royalties. However, there is
little question that Canisius will receive at least
some of the future royalties, making his appeal a worthwhile investment. (Compliments
to Canisius’s attorney, Michael P. Friedman, for the job well done
for his client.)

Today’s opinion essentially instructs Judge Dunn to award a percentage
of the future royalties for Night Circus to Canisius on an “if and
when received” basis. However, the decision also provides Dunn with
significant latitude when calculating Canisius’s exact share after
further trial, suggesting, “for example, a sliding scale of decreasing
percentages, which has a specific termination date”, as an appropriate solution.

There are several broader conclusions that can be drawn from the opinion:

It is worth observing that
any clear, well-written appellate decision that summarizes broad areas of
law will be quoted by attorneys and judges in the future. I have been
critical of the lack of clarity in several recent SJC opinions, and today’s
decision stands as a fine example of clear, well-reasoned legal writing.
For that reason alone, the opinion is likely to be cited in future asset
division cases. (Unfortunately, a footnote indicates that the well-written
decision was authored by former Chief Justice Rapoza, who just retired.)

The case amplifies the Court’s longstanding position that “marital
assets” are broadly defined under Massachusetts law, and that probate
court judges should err on the side of inclusion when it comes to defining
which assets are subject to division.

The case also reinforces the principles articulated in
Casey, where the Appeals Court expressed disfavor for excluding a spouse’s
future pension payments from the division of assets on the grounds that
the pension payments provided a “stream of income” from which
the spouse could pay support. The better practice, today’s opinion
suggests, is for judges to treat the asset
as an asset, with the spouse to receive a direct percentage following the divorce.

Today’s decision is especially relevant in light of the Massachusetts
Alimony Reform Act, enacted in 2011. Under the act, the relatively short
duration of the parties’ marriage in this case (approximately six
years) would have capped alimony for Canisius at about three years. In
contrast, there are no statutory durational limits on how long a former
spouse may receive a percentage of a recurring payment on an “if
and when received” basis. Even if Canisius only receives royalty
payments for a handful of years, it’s a safe bet that these payments
will continue for a longer period than alimony would have under the Massachusetts Act.

It is always tempting for a probate court judge to treat one spouse’s
right to receive payments from an asset earned during the marriage as
a “stream of income” from which that spouse can pay alimony
after the divorce. Today’s opinion reinforces the principle that
payments received by a spouse from an asset – whether the asset
is a pension, annuity
or book royalty deal – is not the same as wages received by the spouse
from an employer for post-divorce work. Guaranteed payments
from an assetwill still be divided
as an
asset, even if the payments look a bit like wages – if you squint your
eyes – because the party “gets paid” from the asset
once a month.

In contrast, actual wages received by a spouse
for work performed afterthe divorce are not assets. Wages and salary are ordinary income, and the best a divorcing
spouse can hope for is a limited (and
modifiable) share of these future earnings through
alimony or
child support.

About the Author: Jason V. Owens is a Massachusetts divorce lawyer and Massachusetts family
law attorney for Lynch & Owens, located in Hingham, Massachusetts.

Schedule a free consultation with Jason V. Owens today at (781) 253-2049
or send him an
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